A bank is a place where people keep their money safe. It also helps people save, borrow, and manage their money. It means a bank works like a trusted friend that keeps your money safe and gives it back when you need it.

There are various banks, and each bank is responsible for performing different functions. 

What is a Bank?

According to R.P. Kent, A bank is an institution that collects idle money temporarily from the public and lends it to other people as per need. Banks provide various services like individual retirement accounts, certificates of deposits, currency exchange, personal loans and so on.

Types of Banks in India:

Banks are classified into various types. Check out the below table for various types of banks.

1. Central Banks:

In India, The Reserve Bank acts as the central bank and as the apex body that regulates and monitors all the other Banks of India. They manage the currency supply, administer the national money, and set interest rates. 

It is important to note that every country has a central bank that regulates all the other banks in that particular country.

Function of Central Banks:

• Protecting depositors interests

• Controller of creditor

• Lender of last resort

2. Co-operative Banks:

A Co-operative Bank is a financial institution that is owned and operated by its customers. The customers are also members of the bank. In addition to this, they also give short-term loans to the agriculture sector and other allied activities. 

Types of Co-operative Bank:

• State level: State cooperative bank, which is regulated by RBI, State Govt, and NABARD.
• District level: Central/District Cooperative Banks
• Village level: Primary/Agriculture Cooperative Banks

Function of Co-operative Bank:

• Accepting deposits

• Disbursement of government subsidies

• Promoting cooperative principles

3. Commercial Banks:

A Commercial bank is a financial Institution that accepts deposits from the public and gives loans for the purpose of consumption and investment to make a profit.

Types of Commercial Banks:

• Public sector banks: Public sector banks are Owned and operated by the government. For example, SBI and PNB.

• Private sector banks: These banks are owned by private companies or individuals. For example, HDFC Bank, Axis Bank, and ICICI bank.

• Foreign Banks: The headquarters of foreign banks lie in their respective countries but their branches are in our country. For example, HSBC, CITI Bank, and Deutsche Bank.

Functions of Commercial Banks:

• Primary functions

  • Accepts deposit

  • Credit cash

• Secondary functions

  • Overdraft facility

  • Locker facilities

  • Paying and gathering the cash

4. Regional Rural Bank: 

After the Commercial and Co-operative banks, the Regional Rural Banks (RRB) is the third layer of commercial banking organisation. These banks are the scheduled commercial banks that conduct banking activities for the rural areas at the state level. For example, Kerala Gramin Bank, Kaveri Gramin bank, and Manipur Rural Bank.

Function of Regional Rural Bank:

• Promoting Agriculture development

• Offering Microfinance services

• Providing savings and deposit products

5. Local Areas Bank:

It is small private banks that provide financial services in a limited area, usually in rural and semi-urban areas. 

As of February 2025, there are two local area banks in India namely Coastal Local Area Bank Ltd and Krishna Bhima Samruddhi Local Area Bank Ltd.

Functions of Local Area Bank (LAB)

• LAB offers loans to support local customers for agriculture and related activities.

• It performs all normal banking activities that are performed by commercial banks 

• LAB must make at least forty percent of the total credit available to the priority or the targeted sector from which it gives 10% to the weaker society.

6. Specialized Banks: 

Certain banks are introduced for specific purposes only. Such banks are known as specialised banks. For example,the Small Industrial Development Bank of India (SIDBI), Export and Import Bank (EXIM Bank), National Bank for Agriculture and Rural Development (NABARD). 

Functions of Specialised Bank:

• Help businesses and individuals manage their financial challenges and long-term planning.

• With the help of trade finance and export/import services, it supports international trade and commerce.

• To manage sector specific risks, specialised banks provide insurance and financial products.

7. Small Finance Banks: 

These banks are created by the RBI. Small finance banks are the financial institutions that provide financial services to the unreserved and unbanked regions of the country.

Example of Small finance bank: Capital Small Finance Bank. Jana small Example of Small finance bank finance bank, Utkarsh Small Finance Bank and so on.

8. Payment Banks: 

These banks are newly introduced by the Reserve Bank of India (RBI) which cannot issue credit. People who have an account in the payment bank can only deposit an amount of up to Rs. 100,000/- and cannot apply for loans. 

For example: Airtel Payments Bank, Fino Payment Bank, Jio Payments Bank and so on.

Functions of Payment Banks:

• Allow customers to use mobile wallets.

• Bring unbanked and underserved population into the formal financial system.

• Provide cashless transactions, P2P transfers, and mobile payments.

• Enables secure online transactions and payments for goods and services.

Roles, and Responsibilities of Various Types of Banks in India

Conclusion:

Every bank has a unique role in the Indian Financial system which helps urban and rural areas by promoting economic growth, financial inclusion, and development. 

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• Also check:

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